The global economy is still on shaky ground, and despite budding signs of recovery, evidence is not strong enough to conclude that the current recession is waning, according to an International Chamber of Commerce (ICC) report on trade finance released in Paris Sept. 7.

The ICC Interim Trade Finance Survey polled 122 banks in 59 countries during July and August and is a follow-up to the ICC Banking Commission Report, Rethinking Trade Finance 2009, released in March. In contrast to findings of the previous report, which indicated a significant decrease in trade volume and value, 67 percent of respondents indicated that trade volume had either increased or remained the same in the first half of 2009. The report also points to increased demand for trade finance in the first half of 2009 compared with the same period in 2008. The report warns, however, that a recovery in demand for merchandise trade without a corresponding increase in the ability of banks to provide credit, would risk a significant dislocation of trade, thus hampering the global recovery.

In what the report describes as "one of the most worrisome results," increased capital costs continue to constrain trade finance volumes, particularly in developing economies. Report recommendations on the issue include exempting trade finance products from the one-year maturity floor applied to lending facilities in most countries, and allowing key risk attributes to be determined on the basis of industry benchmarks reflecting the low-risk nature of trade finance.

The ICC report also points to the issue of affordability of trade finance. "The costs of obtaining traditional trade finance products are still rising, but they are seen as affordable costs given the additional security that the products offer the parties," Gary Collyer, technical advisor to the ICC Banking Commission, says in the report foreword.

The report, compiled by ICC Banking Commission officers, concludes that despite an anticipated return to positive growth, problems relating to the availability of trade finance can be expected well into 2010.